My grandad completely forgot he took out a lifetime mortgage

[hobbitum]

A few hours ago I didn't even know what a lifetime mortgage was and wish I didn't now!

My grandad is 90 and thought he had paid off his mortgage. He was getting annual statements that he was putting to one side and not looking at properly thinking they were just a formality.

He was informed this week a new provider was taking it over and his friend saw the letter and realised what has happened. He has made no repayments or paid off any interest for who knows how long.

My grandad doesn't remember taking this remortgage out and it now looks as if it will take his home and every penny of his when he's gone.

The more I find out the more I'm worried there is no recourse and his own awful mistake. He's devastated, completely shocked and feels a failure - I think this will seriously affect his health which is my main concern. He is of sound mind.

I don't know why I'm posting here to be honest - surely mortgage lenders should be checking in on customers like this and doing a bit more than just sending standard letters and waiting to take everything when you die? I just don't know how he could have got himself into this situation. What on Earth can I do to help?

It is made very clear, now at least. It's quite tightly regulated now, and in the last few years anyone selling/advising on products to someone who could be considered a 'vulnerable' consumer (financially, by age, etc) has to be able to evidence very clearly that they've made the correct advice/product recommendation.

There have been plenty of cases of ER misselling, don't get me wrong, but a lot of the time the people kicking off about it are disgruntled children upset that their inheritance got spent.

To be fair, I think in the past these products were marketed to pensioners (in a cold calling way) as a means to get a little lump sum now and avoid their property being swallowed up by care home costs. I do believe the salespeople were just that - salespeople on commission which was naturally not highlighted to the customers. Certainly I know my late MIL Did have all her faculties but was not financially savvy (as far as "big" long term things were concerned - was fine with normal expenses). She always assumed people "from the bank" were advising in her best interests and not to maximise their commission at all costs. She would definitely have assumed someone involved with this stuff would be connected with a reputable institution and not just a sales rep. Had a couple of things over the years that were picked up by us quickly and undone or stopped after a bit of a row.

You need to ask for all of the documentation, speak to an independent financial adviser to see if there is any possible recourse. If there isn't you can only reassure your grandpa everything will be fine lie about inheritance if necessary - it's better than him being distressed about it.

There are many reasons people choose to use equity release schemes and it’s their choice. If possible downsizing would always be preferable if they need to raise funds to pay off an interest only mortgage for instance. But obviously that depends on financial circumstances.

But I do agree with you regarding upkeep costs etc. My MIL needed new windows as they really were at the end of their lifespan. I offered to pay for them instead of her taking ER. But it does obviously depend on individual circumstances.

I can categorically say it is made very clear that it guzzles up inheritance and I can also say that those going ahead were happy for this to happen.
There seems to be a very romanticised opinion on this thread that all parents want to leave an inheritance to their children, that is not true and these parents were happy to access money knowing they wouldn't be paying it back themselves.

Many intelligent elderly people don’t really understand the long term implications until they get there despite being talked through the contract at the time

Maybe not, but if they sign to say they've understood it'll cover the companies - and as said, they have to look out for themselves just as we all do

In any case I'm convinced that what many really hea, at the expense of all else, is the bit about "this will enable you to stay in your own home"- which is a very powerful point to those who've perhaps got relatives persuading them to move to free up money

I don’t see how you can be really of sound mind yet forget this…

I don’t think you are reasonable to have expected the mortgage company to have done any more than they have. The onus is really on the family to ensure that when a person is not of sound mind with respect to legal and financial matters a power of attorney is in place. But other than that, an equity release scheme is perfectly legal and for some people it is the right thing to do. It’s not up to the mortgage company to tell customers what to do.

@BettyBardMacDonald and a very sensible viewpoint- my FIL is 85 and is in process of downsizing - but partly because property and location are no longer suitable. If he was staying out and short of cash to the extent it was restricting life somewhat or causing him to not maintain house or have his heating on whenever he wanted , I would certainly be telling him to draw £60k off his £550k place at this stage of life.

I have looked into these myself. It would be more like £58,000 against a £260,000 house (in the North) to top up saving. We won’t need money when we’re dead, but can enjoy it when we’re alive.

@AnnieSnap if you are over 70 I would say go for it if you are under no illusions and get the figures

But house prices have trebled over the last 20 years(more in the south-east)
So if the loan amount increasing 4-fold is enough to take up the whole of the current house value, it must have been for a large amount, most of the (then) value of the house.
If he honestly can’t remember what he did with such a significant amount of money, then his cognitive decline must be worse than you realise

I’m 65 and my husband is 71. Not ready yet, but may do it. Despite what some people seem to think, not all ‘elderly’ is naive. I have my head firmly screwed on, including about finances.

As you can see from the various responses to this post it suits some people and works well for them.

I think it can also work well initially with people taking the money and ignoring the full financial facts and then being “blindsided” when reality sinks in, even though they are forewarned.

Some people used to take out interest only mortgages quite happily without any plan of actually paying off the principal loan because this was way in the future. The future then becomes the present and reality hits home.

Some people overstretched when interest rates were really low never recognising that they will increase, even though their mortgage repayments illustrated repayments at different interest rates. Then interest rates changed and they were astounded and horrified to learn about revised repayments.

For some taking ER I also think this can be true. They act in the present, ignoring the future ramifications that are spelt out and then feel aggrieved when the future becomes the present as it were. For others they are more financially responsible and understanding that there was always going to be pay back time and that they were happy with their decision making.

I also think that with the passing of time and old age there can be a tendency to misrepresent in the mind what was agreed many years ago and forget the inevitable outcome of previous actions. Which is precisely why these financial structures issue statements as to what the financial position is. In exactly the same way as a private pension issues statements of a pension fund and its status.

@AnnieSnap good for you - I think what's important is to look at all the types as there are quite a few- ones where you pay interest , ones where you pay none- and ones with a mix and match model , also ones where you effectively sell off a percentage - if you get all the financials then it's up to you both -it also can help keep a home maintained or adapted if necessary rather than let somewhere drop to bits.

The fundamental problem seems to be that many (most?) people don’t understand compound interest.

Do companies that sell equity release products have to provide concrete illustrations about what will happen in different scenarios? For instance, if you borrow £30000 and live 10 years, the debt will be X, if 15 years Y, if 20 years Z, et cetera?

Thanks again for such helpful and considered responses today. I really only thought I'd get a couple and it would be a niche area for discussion.

I've been to see him tonight and tried to ease his mind. He is upset he has let me down and they could eventually come to me for anything outstanding on the loan. It's clear his powers of comprehension aren't what they were so this will be hard to get to the bottom of. As some pps pointed out, I think by and large distraction and reassurance are the way to go here rather than confusing him with detail.

I now have some of the correspondence and can make moves on Monday to request the rest of his docs and find out when this goes back to. I need confirmation that there is a no negative equity guarantee as that's not clear right now and would be a help.

He has responded to contact from the lender in recent years (sent ID when requested, etc) so there is clearly not a leg to stand on there in pleading ignorance (the plot thickens). Despite this, I will contact the Ombudsman and look into whether the mortgage was mis-sold. It just doesn't make sense that this would have been the right product for my grandad at the time we think it may have been taken out.

Except they clearly would have preferred him to leave them his house.
The 'I'm just worried about his health' line is...unconvincing.

How so? Based on what?

I disagree. I had a very dear friend who was certainly intelligent (and definitely not mentally incompetent), but he just didn't keep on top of his correspondence! He was retired (in his 60s so not that old), but wouldn't open letters as they arrived. Eventually, he would open them, panic, and bring them round to me to sort out. By that time, they were much more difficult to manage as he had left them sitting, unopened, on the side, for so long! I used to tell him off for 'ostriching' (burying his head in the sand). Some very clever people just can't manage official letters. Perhaps OP's GD was one of these people.

Life experience and some innate cynicism about people in general.

I’m sorry but it is true, I have personally seen many such cases, spoken at length with the heads of a couple of biggest equity release advisors in the country, and read about other similar cases - the Times did a good series on the issue a few years ago. You can also read old cases on the FOS website.

At no point did I say the customers were not of sound mind at the time. Being of sound mind and really understanding a complicated financial product and the concept of compound interest is not the same thing.

Of course you want to believe all is well if you were selling the product. (Although given dementia tends to start 10-15 years before diagnosis it’s not as easy to say as it may seem.) The fact is for reasons that is not entirely clear, elderly people don’t always understand the implications of what they are setting up, even those who are relatively well educated, even those who have had the contract explained.

Talking to an IFA is not as significant as you imply. They are selling the product on commission. As I have said the regulations were changed around 2008 and now each clause of the contract has to be explained, but even so people are still falling though the cracks. They’re old, they’re vulnerable, they think can’t access money any other way without selling, and the advisor assures them this is the best option. It seems like a good idea until the interest roll up eats their money and the statements reveal the harsh reality of their choice.

https://www.fca.org.uk/news/press-releases/firms-must-do-more-ensure-they-are-always-giving-appropriate-equity-release-advice-fca-review-finds

three significant areas of concern which the FCA says increases the risk of harm to consumers:

• Advice given by firms did not always sufficiently take into account consumers’ personal circumstances;
• Consumers reasons for looking at equity release were not always challenged by firms;
• Firms weren’t always able to evidence that their advice was suitable.

Ultimately I agree. Most people don’t understand what compound interest is.

His home is secure. Hundreds of thousands of us live in rented, will have nothing to leave, and our homes aren't secure.
He is just fine, and should not feel any shame over it.

So the feelz.

The no negative equity guarantee is mandatory now, but I don't think that was always the case. I'm afraid I don't know when it changed - the equity release council website may be useful?

Personally, I'd be telling your grandad it applies anyway, there's nothing to be gained from him stressing about an inheritance now.